Ryanair's growth plans risk disaster, warns rival
Friday November 13 2009
EasyJet founder Stelios Haji- Ioannou, who thwarted management plans to boost capacity, said rival Ryanair's growth plans risk disaster. But Ryanair chief Michael O'Leary said it was EasyJet's strategy that was flawed.
Dublin-based Ryanair needs to increase passenger numbers by 50pc over the next two-and-a-half years to fill its 200 aircraft and another 100 on order, said Mr Haji-Ioannou. Mr O'Leary said last month that he aimed to lift the total almost 30pc to 85 million in three years.
"I am looking forward to seeing how this do-or-die mission of Ryanair and Michael O'Leary will end up," Mr Haji-Ioannou said in an interview in London yesterday. "I believe that he will have a lot of grounded aircraft in the next few years."
Mr Haji-Ioannou (42) campaigned against a high-growth strategy at Luton-based EasyJet until the carrier said in July that it would increase the number of seats by 7.5pc a year, compared with an average of 15pc between 2005 and 2008.
"There is no future in the EasyJet strategy of raising fares," Mr O'Leary said yesterday. "If Stelios wants to compete with Ryanair, all he has to do is lower fares."
Ryanair's average fare fell 17pc to €39 in the six months through September 30. EasyJet's passenger revenue per seat, a measure of ticket prices, rose 6.4pc in the third quarter ending June 30, to £41.42.
Ryanair, Europe's number one discount airline, said last month that it wanted to buy another 200 aircraft from Boeing by the year's end.
Negotiations
Mr O'Leary says he'll walk away from negotiations and cancel some existing commitments if a deal can't be struck.
"It must be difficult for Stelios to see us continue to grow while his airline grows more slowly, if at all," Ryanair spokesman Stephen McNamara said.
"Ultimately, Ryanair believes EasyJet will be bought by a larger airline group within the next five years. EasyJet will be gone so Stelios won't have to worry about Ryanair for much longer."
EasyJet's new growth plan is "a lot more sensible" and "much more profitable", said Mr Haji-Ioannou, who with his family is the airline's main investor with a 38pc stake.
"The company is performing very well and the growth rate has been moderated," he said. "When the debate started, it was last September, right after Lehman Brothers collapsed. Who knew how bad this would get? So I'm delighted to say the world didn't come to an end."
EasyJet spokesman Oliver Aust said the carrier has developed a more realistic business plan than Ryanair. "We follow a different strategy and we feel ours is better," he said. "We fly to major airports, which is where our passengers want to go."
EasyJet shares have gained 33pc this year, valuing the carrier at £1.59bn. Ryanair is down 3.4pc and worth €4.24bn.
© Bloomberg
